Every time a celebrity couple splits up news sources start asking questions about prenuptial agreements. It’s been no different during the past few weeks as news and speculation about Tom Cruise and Katie Holmes’ divorce leaks out. But prenuptial agreements aren’t only for celebrities, and they aren’t only for the rich and famous. In fact, any person with significant assets, or with the potential to acquire significant assets, should strongly consider signing a prenup before walking down the aisle.

A recent article from Fox Business News points out that “While prenups are most common if either party has substantial assets, children from a prior marriage, high income or has lost assets to a previous spouse… individuals might also want to plan successions related to family businesses or protect parental trusts that have been set up for either party.”

Discussing a prenup with your fiancé doesn’t have to take the romance out of the coming nuptials. In fact, considering a prenuptial agreement—discussing your financial values and planning for your financial future together—can be a valuable bonding experience for a young couple. With the right guidance from a knowledgeable individual, a prenuptial agreement can bring two people closer together.

But a prenuptial agreement isn’t something that can be thrown together at the last minute; it requires planning, research and discussion. Don’t wait too long before broaching the subject with your fiancé and your attorney. Make sure your new life together starts off on strong and secure financial footing.

How dead do you have to be before the government can tap your estate for estate taxes? Do you have to be only kind of dead, or do you have to be fully dead-dead? This is the subject of a new law review article by Adam Chodorow of the Arizona State University law school, as well as the topic under discussion in this tongue-in-cheek article in the New York Times.

When it comes to the legal rights of the undead Chodorow believes that “The important question is determining whether zombies should be considered truly deceased or partly alive. That distinction is crucial financially.” The article continues searching for answers to this and other particularly unusual questions in a hilarious but educational vein. Never has estate planning been so interesting—or trendy!—and yet readers will find themselves learning a little bit about the law in spite of themselves. Consider the following:

“But there are some tax downsides to zombiedom. When you actually die — for clarity, let’s call this ‘die-die’ — the appreciation in the value of your assets is wiped out for tax purposes. Say a vintage car you bought for $50,000 is worth $100,000 when you die-die. Under I.R.S. rules, this doesn’t cost your heirs taxes on the $50,000 gain when they sell it. Instead, the car is valued at $100,000.”

It’s the Stepped-up basis rule applied to the undead.

The article is obviously written in fun, but it brings up some legal issues that even the living would do well to think about. There have been a lot of changes to gift tax and estate tax law in the past few years, and if you haven’t created your estate plan, or if you have an estate plan but haven’t reviewed or updated it recently, you may have worse things to worry about than a zombie apocalypse. Call our office and make sure your assets and your family are protected from every kind of disaster.

Here is a Fox Business article with good points about why you need a Will, but it fails to mention that having a Will instead of a comprehensive estate plan means your family may be forced to go through probate in California. Probate, if it can be avoided, should be avoided by having a Living Trust drafted to address the concerns mentioned in this article. The trust takes the place of the Will and avoids probate.

When legislation in 2010 raised the lifetime gift tax exclusion amount from $1 million to $5 million many wealthy families rejoiced, expecting that they would now be able to give large gifts to children or grandchildren and be able to save millions in taxes at the same time. But for all the rejoicing, the unsteady economy has made many people cautious, and has parents and grandparents thinking twice before giving away wealth that they may need themselves in later years.

According to this article in Bloomberg Business Week, however, the time has come for families to take a careful look at their finances and decide if they want to take advantage of the $5 Million gift tax exclusion before it expires. “Legislation enacted in 2010, which raised the lifetime gift-tax exclusion to $5 million from $1 million for each person starting last year, is set to expire. For 2012, the inflation- adjusted figure is $5.12 million for each person. It will drop to $1 million on Jan. 1 unless Congress acts.”

Parents who want to take advantage of the gift tax exclusion, but who worry that their children may not yet be ready to handle such a large financial gift, do have options. As the article points out, “Many [families] are setting up irrevocable trusts for children or grandchildren and transferring assets such as second homes that have the potential to appreciate.” This not only allows the assets to appreciate, but also allows parents and grandparents to breathe easy while young children or grandchildren have time to mature before receiving a gift or inheritance.

If you think your family may benefit from taking advantage of the gift tax exclusion before the end of the year, please contact our office. We can help you explore your options and learn more about what legal changes may be in store in the coming year.

Do you know how much your 401(k) is costing you? Are you sure? What most people don’t know is that many employees with “free” retirement plans through an employer actually pay a number of hidden fees. According to a recent article in the Huffington Post, “71 percent of plan participants don’t think they pay any fees for their company’s retirement plan. In reality, they pay a variety of fees including investment management, administrative and advisory fees, and more — investment management fees usually comprising the bulk of the expenses.”

All of this is about to change, however, thanks to new laws being enacted by the Department of Labor. CNN Money reports that “A new federal rule took effect July 1 that requires 401(k) plan providers to disclose certain 401(k) fees, and employers to distribute these disclosures to plan participants by Aug. 30.” The hope with this new disclosure rule is that it will increase transparency, and help both employees and employers stay aware of how much their “free” 401(k) may or may not be costing them in administrative fees.

We live in a culture of constant demands and distractions, and it is all too easy to fill out the paperwork to set up a 401(k) with an employer and then forget about it, assuming that as long as nothing changes, everything will keep working the way it’s supposed too. Things do change, however, both in the world of investment and in our own lives. All too often we see clients who miscalculate their 401(k) growth in relation to their retirement needs, or whose valuable retirement savings is lost to taxes when the owner passes away unexpectedly. In all cases, it is important not only to be aware of what’s happening to your savings, but also to be proactive about protecting it, and this is where our office can help.

Whether you are already retired or just getting started with your savings, our firm can help you evaluate your assets, plan for their growth and upkeep, and ensure that they end up in the right hands if something should happen to you. The temptation to procrastinate or bury your head in the sand can be strong, but the knowledge of the consequences of inaction can be stronger. Contact our office and let us help you protect your retirement savings for yourself and your loved ones.

Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with all the recent changes to estate tax law, some plans that were drafted years ago and never updated by their creators won’t work as intended anymore—and heirs may end up looking for a way to protect themselves against the unintended consequences of these well-intentioned estate plans. This is a subject that we have touched on before on our blog, but is worth mentioning again as we close in on 2013.

This article in the New York Times explains what it means if you disclaim (or turn down) an inheritance, and when you may want to employ this tactic.

“Historically, lawyers have recommended disclaimers to repair estate planning oversights that bring negative tax consequences — as when parents left money to already affluent adult children. In such a case, the children could disclaim, so the inheritance would go their own children instead, rather than facing the possibility that this money might be taxed in their own estates.”

Although this is an interesting solution to be considered in some cases, there are no easy answers to the question of what to do when you are the beneficiary of an estate that has taken an unexpected turn. If you have any questions whatsoever about an inheritance—or about your own estate plan—call your estate planning attorney for help.

The question of will forgery or undue influence of a testator is not a common question, but one that does come up periodically in an estate planner’s office. The movies have given people certain expectations when it comes to a death in the family and probating a will: a book-lined office, the entire family assembled for a formal reading of the will, shocked and angry reactions as a loved one’s fortune goes to an unknown and unlikely character…

This Hollywood portrayal may be generally off base, but the basic premise is based on the very real feelings that come with the death of a loved one: helplessness, confusion, familial bonds, and sometimes even betrayal. A will doesn’t have to be forged for there to be strong feelings of anger or suspicion when the contents end up being different than the family was led to expect. And while forged or secret wills may not be as common as the movies would have us believe, they aren’t completely unheard of either.

So what should you do if you suspect that the will of a loved one has been forged or tampered with? First of all, don’t try to deal with the situation alone. Dealing with the death of a loved one is stressful and emotional, and everyone—including you—is likely to be quicker than usual to react without thinking. Instead, seek the advice of a trusted third party (an estate or probate lawyer is ideal,) someone who can help you distance yourself and look at the situation objectively.

Will forgeries are very rare, but incidents of testators (especially elderly testators) being unduly influenced by a selfishly motivated caregiver or family member are much more common. If you suspect foul play was involved in the creation of a loved one’s will, make an appointment with an estate or probate specialist. We can help you work through your suspicions in a safe environment and explore your options should you feel the need to take action.

Most people die in a hospital; sometimes after a long and slow decline, sometimes after a quick and unexpected tragedy. If you are an executor of the deceased’s estate this is significant because it means that there are usually final medical bills to be paid. What most executors do not know is that these final medical bills are not necessarily just like all the other final expenses, especially when it comes to filing a final tax return for the estate; this article from SmartMoney.com explains why.

“…When a person incurs medical expenses and dies before they are paid, the executor of the decedent’s estate can elect to treat those medical expenses as if they were paid when incurred – as long as the estate pays the expenses within one year after the date of death. In other words, this election allows those expenses to be deducted on the decedent’s final Form 1040, even though they were not paid by the date of death.”

Many executors may not think of this because medical expenses can only be deducted if they exceed a certain percentage of the deceased’s adjusted gross income (7.5% to be exact); but health care being what it is, final medical expenses can quite often reach this point.

This sounds easy, but be careful if the deceased’s estate exceeds the $3.5 million estate tax exemption—you may want to look into other options. The article suggests that in this case it might be beneficial to “forgo the election and count the unpaid medical expenses as liabilities on the estate tax return.”

As the executor of an estate you may have more options than you are aware of when it comes to taxes, probate, and achieving the best results for the beneficiaries. If you are unsure about any of these—or other—issues, please contact our office, we can help advise you on all angles of the trustee or probate process.

Every parent wants to love and treat all their children the same, but when it comes to estate planning, not every child should be treated the same. In fact, insisting on treating all children exactly the same in an estate plan can often lead to disastrous consequences. However, as this article from The Street points out, treating children differently does not necessarily mean unequally.

The article points out the following three ways that you can treat your children differently in an estate plan, but sill equally:

1. Not naming all of your children as successor executors

2. Gifting the annual gift exclusion of $13,000 outright to some children while putting it in trust for another child

3. Leaving one child’s inheritance outright while leaving another child’s inheritance in trust

The fact of the matter is that all of your children will be different people, with different strengths and weaknesses. While one child may love the trust and challenge that comes with being named executor, another might feel crushed under the weight of responsibility. One child might take an outright inheritance and invest it for retirement, while another child may want to do that, but have an ex-spouse or creditors who would seize an unprotected sum of money, leaving the heir with nothing.

Every parent knows that it is impossible to treat all of their children exactly the same. Children are just too different. But it is possible to know your children, to be aware of their circumstances, strengths and weaknesses, and give them an equal inheritance in different ways. Our firm can help you do this. Contact us today.

News sources recently revealed that Facebook founder Mark Zuckerberg—as well as other Facebook top brass—use Grantor Retained Annuity Trusts to protect their assets and investments from excessive taxation. Grantor Retained Annuity Trusts (more commonly called GRATs) are a perfectly legal—and very efficient—way to protect and pass significant assets from one person to another without incurring an exorbitantly high tax bill.

According to the article cited above, “GRATs offer a perfect vehicle for wealthy investors who put money in start-ups, while other trusts don’t.” But we don’t recommend GRATs only to wealthy startup investors. GRATs are “an excellent way to shift wealth to others at little or no tax cost and with minimal legal and economic risk.” As such, they can be the perfect tool for business owners, professional investors, and many others.

Setting up a GRAT allows the investor/grantor to give assets over to the trust for a pre-determined number of years. During this time the assets appreciate and the grantor receives “annual payments adding up to the asset’s original value plus a return based on a fixed interest rate determined by the Internal Revenue Service.” At the end of the trust term the assets (at their new value) are transferred to the beneficiary named in the trust with none of the usual gift or estate tax on the appreciation.

This makes GRATs sound like the perfect (and perfectly simple) tool, but nothing is perfectly simple. The pre-determined lifetime of your GRAT will depend on your individual circumstances, as well as the tax laws at the time, so you’ll want to make sure you have the help of an experienced and knowledgeable attorney helping you design your trust. Contact our office for more information.